Europe’s support for the JCPOA is a needless financial gamble

President Trump’s decision to remove Washington’s support for the Iran nuclear deal (JCPOA) hardly came as a surprise. He has made no secret of his contempt for an agreement which he branded this week a “horrible, one-sided deal.” Europe, and in particular the E3 of Germany, France and the UK, who are signatories to the JCPOA, have had ample warning to fix and revise the accord. However, they continue to cling onto the JCPOA in its current form, despite its obvious flaws.

In a joint statement in the aftermath of Trump’s speech, Prime Minister May, President Macron and Chancellor Merkel declared “continuing commitment” to the deal and urged “its full implementation.” The media has made much of the diplomatic discord between Washington and Europe. In doing so though, too many have overlooked the potentially grave financial implications for European businesses, owing to the E3’s stubborn defence of an indefensible deal.

There was initial discussion of the impact Trump’s decision would have on energy and currency markets. But the undeniable truth is that the new reality will have a long-lasting and profound ripple effect, especially for a European market which has enthusiastically knocked at Tehran’s door since the JCPOA was signed in 2015. Trade between Europe and Iran spiked from $9.2 billion in 2015 to $16.4 billion just a year later, before reaching $25 billion last year. In particular, German exports to Iran grew by more than 27 percent from 2015 to 2016.

For the main European protagonists fuelling this trend – The likes of Total, Royal Dutch Shell, Airbus and Renault – one sentence from Trump’s speech this week will have stuck out like a particularly sore thumb. He said, “We will be instituting the highest level of economic sanction. Any nation that helps Iran in its quest for nuclear weapons could also be strongly sanctioned by the United States.”

Some may argue that these companies and others aren’t directly aiding Tehran’s nuclear plans. But there is far from any guarantee that Washington will apply such a generous interpretation. How can there be, when Iran has increased its military budget by 48 percent over the past four years, while the average Iranian has become 15 percent poorer over the last decade. In other words, the boon in European trade has been used by Iran’s leaders to finance its military – including nuclear – ambitions.

More strikingly, there are some European companies with particular cause for concern over their investments in Iran. European aviation giant Airbus had agreed the sale of at least 73 jets to two Iranian airlines, to the tune of $2.5 billion. However, there is ample evidence that civilian Iranian aircraft have been used by Tehran to supply Syria’s President Assad with both troops and weapons. It seems likely that the United States will clamp down on licenses which allow the sale of passenger jets to Iran. Meanwhile, in another example of the perils of European-Iranian trade, it has been well documented that in 2008, Finnish-German venture Nokia-Siemens sold Iran advanced surveillance technology, which was used just a year later by Tehran’s regime to suppress popular protests.

In short, all European companies doing business in Iran would do well to heed the warning of US Ambassador to Germany, Richard Grenell, who bluntly stated, “German companies doing business in Iran should wind down operations immediately.” The UK Foreign Office has already issued revised guidance to British companies investing in Iran, urging them to consult the US Treasury sanctions plans.

In truth, such caution is long overdue. The current uncertainty provides an opportune moment for European companies and investors to take stock and to widen the debate over Iran trade from legalities and technicalities, to morality. Should anyone in Europe really be doing business with a serial human rights violator? It is estimated that between four to six thousands Iranians have been hanged since the 1979 Islamic Revolution for the ‘crime’ of being gay. Meanwhile, gender repression is alive and kicking, with Iranian women not even free to decide what to wear. Can anyone truly do business in Iran with a clear conscience?

But there is a simple answer to both the moral conundrum and the technical difficulties of trade in Iran, thrown up by Trump’s decision. Instead of unequivocally backing the defective JCPOA, the E3 could and should instead be looking to fix the agreement. Tehran is in a perilous economic position, leaving Europe with real leverage over Iran’s leaders. This influence must be used wisely. The E3 is perfectly placed to push for a deal where success is measured way beyond IAEA verification. Germany, France and UK should instead be leaning heavily on Iran for a revised agreement which curbs Tehran’s ballistic missile development, ends Iran’s enthusiastic support for terror groups and brings about a sea-change in the regime’s attitude towards human rights. This would not only make for the meaningful deal which is so desperately needed, but it would pave the way for flourishing and ethical European business.

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[…] the leaders of the so-called E3 nations, appear to be jumping through hoops to appease Iran and ensure the survival of the JCPOA. But this is certainly not the time to treat Iran with kid gloves. Its people are […]